Statewide Grievance Committee

STATEWIDE GRIEVANCE COMMITTEE

Grievance Complaint #98-0396

O’Connell, Flaherty & Attmore

Complainant : vs.

Jason Pearl

Respondent :

DECISION

Pursuant to Practice Book §2-35, the undersigned, duly-appointed reviewing committee of the Statewide Grievance Committee, conducted hearings at the Superior Court, 1 Court Street, Middletown, Connecticut on May 13, 1999, September 22, 1999, and November 19, 1999. The hearings addressed the record of the complaint filed on November 13, 1998, and the probable cause determination rendered by a reviewing committee of the Statewide Grievance Committee on March 18, 1999 finding that there existed probable cause that the Respondent violated Rules 3.4, 4.1 and 8.4 of the Rules of Professional Conduct. The reviewing committee’s probable cause determination was contrary to the determination of no probable cause filed by the Hartford/New Britain Judicial District, Geographical Areas 12, 15, 16 and 17 Grievance Panel on February 5, 1999.

Notice of the hearings were mailed to the Complainant and to the Respondent on March 26, 1999, June 23, 1999 and October 4, 1999. The Complainant and the Respondent appeared and testified before this reviewing committee. Attorney Robert Hirtle represented the Respondent. Attorney Stephen J. Sinatro represented the Complainant.

This reviewing committee finds the following facts by clear and convincing evidence:

On or about August 13, 1998, the Complainant, on behalf of Walnut Hill, Inc., entered into negotiations for a reduced amount for pay-off of a mortgage held by the Respondent’s client Twin City Pharmacy. In connection with the negotiations, the Complainant and the Respondent reached an understanding which was memorialized in a letter dated August 31, 1998 that Walnut Hill, Inc. would pay Twin City Pharmacy $200,000.00 to settle the debt in full and Twin City Pharmacy would provide a release of mortgage to be held in escrow. The Respondent forwarded a letter to the Complainant dated September 2, 1998 enclosing a release of mortgage to be held in escrow until the $200,000.00 payment had been paid by “clients’ fund check, bank draft, recognized money order or cash”. The letter also enclosed an extract of the minutes of a September 1, 1998 meeting with the Respondent’s client authorizing settlement for the agreed sum payable within thirty days of the execution of the release. Subsequently, the Respondent wrote the Complainant a letter dated October 2, 1998 stating that the time had expired and instructed the Complainant to send payment of the $200,000.00 settlement or return the release of mortgage.

The closing on the Walnut Hill, Inc. refinance and the recording of the release took place on October 6, 1998, prior to the Complainant’s review of the Respondent’s October 2, 1998 correspondence. The Complainant forwarded to the Respondent a title insurance company check for $200,000.00, which check contained language that “negotiation of the check represented full settlement of the amount due.” On October 8, 1998, the Respondent informed the Complainant that the title insurance company check was refused by the bank and that he required Complainant’s clients’ fund check. On October 9, 1998, the Complainant delivered to the Respondent a clients’ fund check for the $200,000.00, which check also contained a restrictive endorsement that “negotiation of this check represents acceptance of full and final settlement of all claims against Walnut Hill, Inc.”. By letter to the Respondent from the Complainant dated and faxed October 9, 1998, the Complainant notified the Respondent that if he refused to deposit the clients’ fund check as full and final settlement of the matter, he must return it immediately. Subsequently, the Respondent instituted litigation against the Complainant and Walnut Hill, Inc. claiming that the entire balance was due. The Respondent deleted the restrictive endorsement on the back of the clients’ fund check without the Complainant’s authorization and deposited and cashed the same. After cashing the check, the Respondent returned the lawsuit to the court.

This reviewing committee also considered the following:

The Respondent contends that he was entitled to delete the restrictive language on the Complainant’s clients’ fund check and negotiate it because the amount of the debt was liquidated and undisputed. The Respondent claims that since Walnut Hill, Inc. owed Twin City Pharmacy a liquidated debt fixed by the mortgage note, Twin City Pharmacy was “entitled to negotiate any check it received in payment on the note without being subject to any releases contained on the check.” The Respondent contends that since he and the Complainant had never negotiated a general release, only a release of the mortgage note and deed, that he was entitled to delete the general release that the Complainant included as a restrictive endorsement on the check. The Respondent further contends that there was a time limit on the agreement to resolve the matter for $200,000.00 and that his client was seeking the full amount of the debt because of the expiration of the time period. The Respondent claims that the Complainant used the general release in violation of the escrow agreement.

This reviewing committee finds the following violations of the Rules of Professional Conduct by clear and convincing evidence:

This reviewing committee concludes that the Respondent’s conduct in connection with the Complainant’s clients’ funds check involved a breach of ethical standards. The Respondent engaged in conduct involving dishonesty, fraud, deceit, or misrepresentation and in conduct prejudicial to the administration of justice in violation of Rule 8.4(3) and (4) of the Rules of Professional Conduct by altering the Complainant’s clients’ fund check and then depositing it. The Respondent knew by the restrictive endorsement language on the back of the check that the clients’ fund check was intended as a full and final payment of all claims. Additionally, the Respondent was informed in writing that if he refused to deposit the check as full and final settlement, he was to return the check immediately. In spite of his knowledge of the Complainant’s position, the Respondent deleted the limiting language and deposited the check. We are unpersuaded by the Respondent’s contention that he was entitled to delete the restrictive language and deposit the check since the debt was liquidated and undisputed. This reviewing committee notes that the record lacks clear and convincing evidence to substantiate a finding of a violation of Rules 3.4 and 4.1 of the Rules of Professional Conduct. Notwithstanding, since we conclude that the Respondent violated Rule 8.4 (3) and (4) of the Rules of Professional Conduct, we reprimand the Respondent.

Attorney Kerry A. Tarpey

Attorney Lorraine Eckert

Mr. Terrence Nichols